No one is expecting the Chancellor to be announcing tax cuts in this
month's pre-budget report and most commentators are expecting him to
raise additional revenue to meet the government's existing commitments
on public services. However, he ruled out increases in personal tax
rates for the lifetime of this parliament during the election campaign
and it seems unlikely that the Chancellor would choose to tax business
more heavily in time of impending recession.

A softer target could be increasing
the upper limit for National Insurance Contributions, effectively
taxing "Middle England" but far enough ahead of the next
election to be politically acceptable. There is also scope to increase
government borrowing within the treasury's "prudent" rules
given the repayments of the national debt in recent years.

So will there be any give-aways? If
there are any tax cuts they are likely to "highly targeted"
cuts for small businesses, probably in the form of additional tax
relief for business investment. The Chancellor is also likely to pad
out his speech by announcing "benefits to business" that
will cost the treasury very little, for example cutting red tape or
opening up of government contracts to SME's as announced last month.
And if he runs true to form we can expect to hear more about the tax
credits he has already announced for babies and pensioners.

There are also likely to be special
measures for industries hit by worries over terrorism. The airline and
tourist industries must be favourites for some help. There might also
be new tax allowances for business security equipment, although tax
relief on gas masks is a bit of an outside bet! However, judging by
the level of help given to the farming industry to help with the
aftermath of foot and mouth, the help is more likely to be giving
businesses more time to pay their tax bills than any significant input
of cash.

Similarly, now that the main phase of
foot and mouth disease seems to have been quelled, we may see a group
of smaller (and cheaper) measures packaged together as a "Rural
Regeneration Plan. The Chancellor likes to have a theme to hang his
speech on so that it sounds good on the TV news without changing the
tax legislation and more importantly the Treasury's receipts very
much.

One thing we can be fairly certain
about is that there will be increases in the Inland Revenue's powers
to investigate taxpayers and businesses; this year's excuse being that
more powers are needed for the war against terrorism.

Overall don't expect many fireworks in
this year's report but watch out for the small print! for further
information contact i.e.taxguard 0800 9759010 or www.ie.taxguard.co.uk